Monaco applies a profits tax, which was introduced in 1964 in accordance with the tax treaty with France. The tax is limited in scope in that it applies only to (a) companies conducting commercial or industrial activities to the extent at least 25% of their turnover is derived from outside Monaco, as well as to (b) companies whose activity consists of the receipt of intellectual property income (see Sec. 8.1.1.).

The concept of permanent establishment itself is not defined under domestic law, which uses a limited territoriality principle. A non-resident company is deemed to have a taxable presence in Monaco if it has a business establishment in Monaco, meaning either:

A complete commercial cycle (such as the purchase and resale of goods); or
The conduct of business through a dependent agent, if such agent either has and habitually exercises the authority to conclude contracts on behalf of the foreign principal or maintains a stock of goods for delivery on behalf of the non-resident in Monaco.

In either case, the non-resident is taxable only if it falls within the limited scope of tax.

Note that establishing a branch requires prior approval from the Monegasque authorities. Ordinarily, the activities of a branch would be considered commercial in nature.

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